Canada: Financial Sector Assessment Program-Technical Note on Crisis Preparedness and Safety Nets

This Technical Note focuses on Crisis Preparedness and Safety Nets in Canada. Canadian authorities can exercise a broad range of powers in resolution and the recovery and resolution toolbox is comprehensive and mature. The safety net for depositors in Canada is generally well developed, both at the federal and provincial level, but harmonization across the various schemes is recommendable. The federal deposit insurance coverage limit, last updated in 2005, needs reconsideration. A comprehensive resolution framework for insurance companies is still pending, though policyholders are protected by two industry-based guarantee funds. The dated legal regime for liquidation of financial institutions at the federal level remains functional, but requires an overhaul. While the flexibility of Winding-up and Restructuring Act (WURA) still allows it to deal with the complexity of modern financial conglomerates, even those with cross border activities, its lack of specific restructuring tools can leave space for interpretation which can lead to uncertainty. A comprehensive reform of the liquidation framework is needed.